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A company shall require more capital for the growth apart from the founders or promoters’ contribution. In order to raise sufficient capital, the company may make a private offer to a select group of persons to subscribe to the securities of the company. The board of directors of the company shall identify such persons (‘identified...

Can a company give loan to a person who is a director of the company? A company shall advance loan to its director, directly or indirectly, subject to approval by a special resolution of the shareholders. The compliance restriction of shareholder’s approval shall be applicable even in case the loan is given to the director...

The exchange of relevant business information between parties plays a crucial role for the success or failure of any Mergers and Acquisition (“M&A”) or Private Equity (“PE”) deal. Both parties, especially the buyer, rely on the authenticity of such information for closing the deal. In this context, the role of representations and warranties is critical...

In order to avoid the ‘Pricing Guidelines’ [discussed previously in Part 4 of this story], the additional shares to be allotted to the original investor of the Indian startup company to comply with the Anti-Dilution Rights must be issued under the ‘rights issue’ mechanism under Section 62 (1) (a) of the Companies Act, 2013 instead...

Contravention of FEMA (TISPRO) Regulations, 2017 It is clear from the ‘Introduction’ [Part 1 of this story] that, if the Anti-Dilution Rights gets triggered, a startup company must issue additional shares to the investor exercising such Anti-Dilution Rights at no price or at a price lower than the value at which the fresh subscription has...

In Part 1 of the Anti-Dilution Rights story, we discussed the Anti-Dilution Rights in general, and identified that there are two mechanisms for Anti-Dilution Rights protection: i. Full Ratchet Method; and ii. Weighted Average Method. In this Part 3, we will dig deeper into the Weighted Average Method. The Weighted Average Method of calculation is...

In Part 1 of the Anti-Dilution Rights story, we discussed the Anti-Dilution Rights in general, and identified that there are two mechanisms for Anti-Dilution Rights protection: i. Full Ratchet Method; and ii. Weighted Average Method. In this Part 2, we will dig deeper into the Full Ratchet Method. The Full Ratchet Method is a simpler...

In India, the inclusion of ‘Anti-Dilution Rights’ in definitive agreements governing a startup or venture capital deal is quite common. These Anti-Dilution Rights provide protection to the investors against the dip in value of their newly purchased shares in the future event of subsequent investments in the startup company. This is actually quite fair in...

Section 6 of the Insolvency and Bankruptcy Code, 2016 (the “Code”) provides for “Persons who may initiate corporate insolvency resolution process” wherein the financial creditor, operational creditor or the corporate debtor itself, may “initiate the insolvency resolution process”. An application for insolvency of a corporate debtor or corporate person may be filed under Sections 7, 8 and...

The Insolvency and Bankruptcy Code, 2016 (the “Code”) allows initiation of an insolvency process, under Section 6 in the prescribed manner, by financial creditors, operational creditors or the corporate debtor itself. Section 5(20) has defined an ‘operational creditor’ as “a person to whom an operational debt is owed and includes any person to whom such debt...